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Last month, a big step toward changing the format in which you can hold shares of stock occurred. Financial securities, such as stocks and bonds, were converted into digital tokens. The tokens were then traded and settled on a blockchain—the same technology underlying cryptocurrencies—instead of through the traditional process.

This was not some far-fetched experiment either. More than 30 financial firms participated, including BlackRock, CME Group, Goldman Sachs, Invesco, J.P. Morgan, S&P Dow Jones Indices, Vanguard and others.

News about the trial came out as I was finalizing an article for this issue about a related development. Transfer agent Computershare is supporting publicly traded companies that choose to make their shares available in a digital format and tradable on a blockchain.

Specifically, Computershare is supporting issuer-sponsored tokens (ISTs). ISTs are just like paper stock certificates or the stocks held in our brokerage accounts in terms of what they represent: full equity ownership. IST ownership gives you the ability to vote your proxy and receive dividends, if the company pays them.

ISTs are held in a digital wallet instead of through a brokerage account. You can trade them on an approved blockchain anytime you want, subject to any requirements set by the issuer or the blockchain. Settlement of IST transactions occurs immediately instead of one business day after the transaction.

The format in which you and I own stocks is not going away. ISTs are simply another form of stock ownership available to you. All of us will still be able to keep our share ownership through a broker. Holding shares outside of a broker—either electronically (“a book-entry position”) or via physical certificates—will still be possible too.

To provide you with a deeper understanding of this change, I spoke with Peter Duggan, an executive vice president with Computershare. Many of you may be familiar with the company’s name via shareholder communications. As a transfer agent, Computershare manages shareholder registries for many companies, among other services.

Our conversation went beyond tokenized shares to how share ownership is tracked and updated. It is a fascinating look behind the scenes that will help you understand how you are actually recognized as a shareholder of a company.

Wishing you prosperity and good health,

Chuck Rotblut siganture image

Discussion

BARRY J from TX posted 19 days ago:

Charles, I try not to be a Luddite, but I do not see any advantages of tokens to anyone but the token industry and Computershare who both stand to benefit financially. #1 After you stated, “ISTs are just like … ,” I counted half a dozen differences that are disadvantages over paper stock certificates. #2 The statement that “the tokens were traded and settled on a blockchain — the same tech underlying crypto” brings in all the risks associated and reported about digital wallets. #3 Perhaps Mr. Dugan would help me/us understand how we benefit. #4 Please advise Mr. Dugan that a purported “benefit” is not a benefit if the user of the “benefit” does not need it or does not see or understand the benefit offered. #5 I follow crypto technology in the weekly SCHW Crypto news to stay informed. All it does is try to explain away the continuing underperformance of digital wallets (lost tokens), blockchains (stolen tokens), and sinking crypto returns (tokens performing lower than SPX YTD). #6 Charles, I genuinely appreciate your yeoman-like ongoing diligence to keep us informed and safe, but I am calloused by the circus parade of industry “gurus” AAII has invited to harangue us with a list of “benefits” of their products and/or services that only provide profits FOR them and do NOT bother to provide evidence of how we can achieve increased profit potential. Regards.

JOHN L from NJ posted 19 days ago:

Excellent Barry J. I could not agree more with your comments!

ROBERT A from NC posted 18 days ago:

Thank you, Barry. You wrote my comment for me!

NATHANIEL A from GA posted 18 days ago:

I do not find this crypto arrangement to be either beneficial or appealing.

BARRY J from TX posted 17 days ago:

Here are some of this week’s crypto news highlights from various sources. (1) Bitwise 10 Large Crypto Index down 2%. (2) Bitcoin down 2%. (3) Ether flat. (4) The crypto markets were down due to a security flaw in 500 crypto wallets because a random number generator (RNG) used to generate seed phrases was NOT a TRUE RNG and ended up producing predictable wallet passwords. (5) Then hackers used AI to cypher the private keys and steal $38M in bitcoin. (6) ROBINHOOD's blockchain generated only $3.4M in fees since it was launched. This is less than 1% of Ethereum over the same period. (7) It’s this way more or less every week. Looks like just another day of fun and games in Crypto World. (8) Being greedy and stupid is a bad combination in investing.

JOHN F from FL posted 11 days ago:

Will SIPC cover losses if the blockchain is broken into???

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